Mortgage SVRs

plm106

Is anybody else stuck in an SVR trap?

I have recently come off a fixed rate to be automatically put onto an extortionately high SVR- 5% at A&L (and there are many banks which have the audacity to charge even more).

This is 10 times higher than the Bank of England base rate / LIBOR. Some institutional lenders are certainly making great margins.

I'm all for chipping in and helping the UK financial system recover, but not to the tune of £350/month extra than if SVRs were at 2.5%.

As my LTV has now gone over 100%, there are no other mortgages which I could apply for. Due to this I can't even go onto a SVR rate with another bank e.g. Lloyds & Nationwide @ 2.5%!

_Andy_

In fairness it isn't a 'trap' - you were aware entering the mortgage you would go on to the SVR and that it would be variable. There was never a guarantee of remortgaging after the fixed rate - the period on the SVR is as much as part of the contract as the fixed was.
Lloyds and NW may have lower SVRs but won't accept new borrowers on to that product anyway.
SVRs (with a couple of exceptions) don't have to directly follow what the base rate does.

beecher

You're in a negative equity trap and you need to get out of it. Overpay everything you can to get your LTV down - what are you going to do when rates rise? SVRs were closer to 8% this time last year.

RufusA

The problem is that Alliance & Leicester shouldn't use LIBOR or BoE to finance mortgages. This is part of the reason banks got in such a mess in the first place - you shouldn't use short term financial measures to finance long term commitments, as when the money supply dries up, you are in a pickle!

Try looking at long term swap rates, over 10 years+ these are up at the 4.5% level. So charging 5% SVR on something that may have cost them 4.5% isn't unreasonable IMHO. I assume you've got more than 10 years to run on your mortgage?

Slightly simplictic, as mortgages are funded through a variety of sources, but IMHO banks / building societies aren't over profiting from thier SVRs and the different rates are a reflection of their funding options.

As others have said, you should be looking at your personal circs, and trying to improve your LTV.

HTH - Rufus.